2010.....A Market Overview

This past year has been very challenging for real estate. The market was defined by outside intervention. This intervention tugged at historic trends. Government involvment caused market fundamentals to be distorted beyond recognition. Unpredictability was the only thing we could predict.


Modifications

The administration's announced goal of the modification program was to save 3-4 million families from losing their homes. The actual number of homeowners assisted will come in at less than one million. Most consider the program a failure.

However, we believe that there was a secondary unannounced goal of the modification program: to slow the flow of foreclosed homes to the market. Putting homes through the modification process prevented banks from moving forward with the repossession process as quickly as they normally would.

Limiting supply was one of the ways the administration used to help stabilize home prices. However, the administration has recently slowed the modification process. Going into 2011, a larger number of foreclosed properties will enter the market.

Interest Rates

The administration began to control rates back in 2009 with the purchase of mortgage-backed-securities. When it was announced that the government would back off the purchases in the spring of 2010, everyone (including us) believed that mortgage rates would climb back to historic norms (6-7%) by the end of the year. The exact opposite took place. Rates fell to almost 4% on 30-year mortgages before jumping back to the 4.5 – 5% range at the end of the year.

The most amazing part was that the lower interest rates did not seem to spur buyer activity as sales softened while rates continued to fall through the year. Interest rates, at best, helped in maintaining demand in 2010.

Home Buyers' Tax Credit

Again, the administration's goal was to stabilize home values. The tax credit was supposed to drive housing demand. And it did – for the first four months of the year. However, it now appears that the tax credit did not increase overall demand, but instead, just pulled that demand forward.

Bottom Line

By decreasing supply (mortgage modifications limited the number and impacted the speed of foreclosures entering the market) and increasing demand (lowering interest rates and issuing a tax credit), the administration tried to stabilize the housing market. They accomplished some of their goals in a limited way.

We will not see this magnitude of government intervention in 2011 however. What will that mean to housing next year? We will give our thoughts on that in tomorrow's blog.

5 Reasons You Should Sell Right Now!

Selling your house in today's market can be extremely difficult. It is for that reason that every seller should take advantage of each and every chance that appears. There is a fantastic opportunity available right now.

Here are five reasons you should consider selling in the first 90 days of 2011

1. Interest rates have spiked up.

Rates have jumped over 1/2 point in the last several weeks. The short term result of increasing rates is a surge of buyers jumping off the fence to purchase in fear that rates may continue climbing upward. This is a short window of opportunity. If rates fall again, buyers will jump back on the fence. If rates continue to rise, it limits the number of buyers who can qualify at each price point. Now is the best time to sell your house.

2. If you are moving up, you can save thousands.

If your family goal is to sell your current house and take advantage of the fabulous selection of properties currently available to buy the home of your dreams a at bargain basement price, DO IT NOW! Prices will continue to soften in most markets. However, if you are buying, COST should be more important than PRICE. Cost can be dramatically impacted by rising mortgage interest rates. Do the math and decide if now is the time.

3. During the winter months, the buyers are serious.

We all realize that buyers are not quick to pull the trigger on the purchase of a home today. There is no sense of urgency with the supply of eligible properties at all time highs. However, at this time of year, the 'lookers' are either staying warm (in the North) or just busy with other priorities. The home buyers left in the market are serious and are more apt to buy. Less showings – but to more motivated purchasers.

4. You beat the rush of inventory that is coming next year.

Every year there is an increase of inventory which comes to market from January through April as homeowners put their houses up for sale in preparation for the spring market. Here is the number of listings available for sale in 2010.

■January – 3,277,000

■February – 3,531,000

■March – 3,626,000

■April – 4,029,000

We believe there is a pent-up selling demand (homeowners who have held off selling over the last year) that will lead to an increase in these numbers this spring. You won't have to worry about this increasing competition if you sell now.

5. You have less 'discounted' inventory with which to compete.

This year, sellers of non-distressed properties have been given an early holiday present. With banks trying to rectify their foreclosure procedures, there has been a large supply of discounted properties removed from competition. No one knows how long it will take banks to return to the normal flow of foreclosed properties to the market. However, until they do, every homeowner has a better chance of selling their property.

Bottom Line

If you are looking to sell in 2011, there may not be a more opportune time than this right now. Serious buyers, great move-up deals and less competition from super-motivated sellers and foreclosures creates the perfect selling situation. Don't miss it!

Are Homes Actually UNDER-Valued?

We have been barraged with headlines and news stories telling us that home values will continue to soften for the next several quarters. Some experts are predicting that today’s values will drop and not be seen again until the middle of 2012 at the earliest. We concur with these estimates based on the current demand for housing in relationship to current supply of both the visible and the shadow inventory of houses. Here we are discussing ‘market value’.


However, there is another way to value residential real estate. Housing analysts look at the ratio between current wages and sales prices. They use a multiplier to determine how much home the average buyer can afford and compare that to the average price at which a home sells. DSNews just ran an article on this subject. They stated:

The sharp fall in residential property prices in the third quarter means that housing in the United States has become even more undervalued, according to the analysts at Capital Economics.

Based on the latest S&P Case-Shiller index, Capital Economics has concluded that house prices are now 17 percent undervalued relative to disposable income per capita. Housing has never before looked as undervalued, the firm pointed out in a research note released to DSNews.


Looking at the data included in the index compiled by the Federal Housing Finance Agency (FHFA), residential home prices are 14 percent undervalued, which is also a record, according to Capital Economics.

The National Association of Realtors (NAR) has their own Housing Affordability Index. According to NAR:

The affordability index measures whether or not a typical family could qualify for a mortgage loan on a typical home. A typical home is defined as the national median-priced, existing single-family home as calculated by NAR. The typical family is defined as one earning the median family income as reported by the U.S. Bureau of the Census. The prevailing mortgage interest rate is the effective rate on loans closed on existing homes from the Federal Housing Finance Board and HSH Associates, Butler, N.J. These components are used to determine if the median income family can qualify for a mortgage on a typical home.

In their article, DSNews also addresses the NAR index:

The housing affordability index from the National Association of Realtors (NAR) remains close to its record high. Capital Economics explained that NAR's affordability assessment indicates that a median income household with a 20 percent down payment can now more easily afford the monthly mortgage payments on a median-priced home than at any time in the last 30 years.

By each of these historic measurements, homes are at all time values!!

Bottom Line

Lack of consumer confidence has caused many buyers to refrain from taking advantage of the golden opportunities that exist in housing today. However, buyers should look at COST (price and interest rate) not just price. People who purchase today will reap the reward of buying an undervalued asset and should enjoy excellent appreciation when inventory levels return to normal levels.

If you're not looking for a home right now.....why not? You're missing out! If you currently own a home, have you thought about the possibility of "moving up." There are excellent opportunities everywhere!

Reason #46 as to Why It's Important to Purchase Title Insurance

When purchasing a home in Georgia, it is standard that the title be conveyed by a general warranty deed. In fact, the standard Georgia contract reads under paragraph 8 regarding Title:

"A. Warranty: Seller warrants that at the closing Seller will convey good and marketable title to said Property by general warranty deed ......"

But when it comes to purchasing a foreclosure/bank-owned property, the seller typically only provides a special (or limited) warranty deed. They will normally either make the change on the Georgia contract or have the buyer sign off on their bank addendum that advises of the change in the type of deed. Before you sign off on it, make sure you know the difference:

Under a General Warranty Deed, the seller warrants title to the property since the dawn of time. If there is a defect, regardless of the cause, the buyer has the option of proceeding after the seller for any resulting damage. Under a Limited or Special Warranty Deed, the seller is only warranting the title during the period of their ownership. They do not warrant anything that may have happened in the backchain of the title.

This may panic you at first, but this is where the importance of title insurance comes in. If a blemish on the title came up after closing and it was something that was prior to the bank's ownership of the property, then you would be S.O.L. (pardon my french, but it's the best way to put it!); however, IF you purchased title insurance, then you could file a claim under the policy. See why it's important to purchase title insurance? I always tell my buyers that title insurance isn't like when you purchase an electronic at Best Buy and they offer you the extended warranty for an additional fee - I think most of us turn that offer down. This is SO much more important than an extended warranty! You may think that title issues are rare, but come sit down with me and I'll share some of the horror stories with you.

Title insurance is a one time premium that is paid at closing (factored into your closing costs) and it protects you for as long as you or your heirs own the property. The cost varies based on the value of the property, but it's not a large expense and is so incredibly worth it. Depending on the policy, it can cover things like: sudden appearance of unknown heirs claiming interest in the property, forged deeds or impersonations, incorrect legal descriptions, improper recording of deeds, etc.

20,000 Houses will Sell This Weekend.....Will Yours?

There is no doubt that demand for housing has slowed. The National Association of Realtor's 3rd Quarter Existing Homes Sales Report showed that sales were down in all fifty states and the District of Columbia (3rd quarter vs. the 2nd quarter). The decline was in double digits in all but two states (Nevada and California). Those are the facts.

But let us not allow the facts to get in the way of the truth. The truth is that over 4 million homes will have sold in this country by the end of the year. That averages out to be over 10,000 houses a day! Every day – 365 days a year!

Houses are selling. The question is will your house be one of the 10,000 that sell today. That is entirely up to you. You and your family can move on with your plans and dreams immediately. You just have to be willing to price the house at what today's purchaser is willing to pay. Will you be able to sell it for what it would have sold for in the past? Probably not. Will you be able to sell it for the price you had desired? Probably not.

You must weigh the cost of selling today (a reduced profit on your home) against the cost of not getting on with your life. There is no doubt that money is important to everyone, especially today. Being able to follow your plans and dreams is also important however. Don't allow money to ultimately control that decision.

Decide what is best for you and your family – AND DO IT!!

We can show you how. A few times a week we sit down with homeowners and give them the info they need to make a decision. Just last night we delivered some heart-breaking news that the $40,000 the homeowner had put down on the home four years ago has been eaten up by the market's depreciation. There are always other things to take into consideration, however. There's opportunity in Florida, her next destination, where she will likely be able to buy a "dream home" for $150,000 vs. the price tag of $350,000 three years ago. Let us help you make one your most important decisions!

Spreading Holiday Cheer - Holiday Events this Weekend

Ok, so the holiday spirit is coming out in us! Just for a minute we're not going to talk about Real Estate!

We wanted to let you know of some fabulous local events to celebrate the Christmas season. Since we live in Fayette and Henry Counties, we're highlighting events in these areas. If you know of anything else good, please leave a comment so we can share.

1. Fayetteville's Christmas ParadeThis Saturday, December 4th, at 4:30 up and down the sidewalks of downtown Fayetteville. The tree-lighting and festitivities will take place at 6:00 on the square. Heritage Christian Church (right downtown) will have costumed Dicken's characters handing out warm chestnuts. There will also be free hot cocoa and Santa carriage rides from 7:00-9:00.

2. McDonough First United Methodist's Christmas Tour of Homes
This Saturday, December 4th, starting at 10:00am and ending at 3:00pm. Tickets can be purchased online at http://mcdfirst.org/tour-of-homes.html or in person at the Church the day of, located at 151 Macon Street in McDonough (just off of the square). Tour private owned decorated homes all around McDonough. The cost is $10. Once you purchase a ticket, you are given tickets and a list of the homes with directions. You drive from home to home and take the tours at your leisure anytime between 10-3. Did we say we weren't going to talk about Real Estate......ooops! You can bet we're going to look at these homes.....not just because we love houses, but even us Realtors need some holiday enjoyment too!

3. The Avenue Shopping Center in Peachtree City
Every Sunday between Nov 28-Dec 19, The Avenue hosts photos with Santa and horse drawn carriage rides for free. If there's inclement weather, Santa will be in the Joe Muggs coffee shop inside the book store in the shopping center. The Avenue is also decorated so pretty during this time of year. Mix in some shopping while you're there!

4. Our Coldwell Banker Bullard Offices Participate in Toys for Tots
If you participate in Toys for Tots, or would like to, our offices are drop centers for the toys. The Marines will be picking up on December 29th so anytime between now and December 18th you may drop off a new and unwrapped toy. I am told the greatest need right now is for children ages 0-2 and ages 10-13. A list of our office locations can be found at http://www.cbbullard.com/offices.html . You can also drop off at any Publix Grocery store location if that's more convenient.